Gold­man's Cohn urges China to con­vey poli­cies more clearly

The Pak Banker - - COMPANIES/BOSS -

Gold­man Sachs Group Inc. Pres­i­dent Gary Cohn said he hopes that China will im­prove its com­mu­ni­ca­tion of eco­nomic poli­cies as fi­nan­cial mar­kets try to dis­cern what tools the na­tion has to stem its slow­down.

"We've all been telling the Chi­nese that more com­mu­ni­ca­tion, clearer com­mu­ni­ca­tion would be help­ful for the mar­ket," Cohn, 55, said Fri­day in an in­ter­view in Shang­hai, where Group of 20 fi­nance of­fi­cials are meet­ing. "Hope­fully, the Chi­nese are try­ing to more clearly com­mu­ni­cate what their ini­tia­tives are go­ing to be." China is at the cen­ter of ques­tions about where global growth is go­ing to come from, Cohn said, hours af­ter a spate of com­mu­ni­ca­tion from the na­tion's pol­icy mak­ers that sent Asian stocks higher. Peo­ple's Bank of China Gov­er­nor Zhou Xiaochuan said there is scope for fur­ther ac­tions to ad­dress down­side risks to the world's sec­ond­largest econ­omy, while the cen­tral bank pub­lished a state­ment defin­ing its pol­icy as "pru­dent with a slight eas­ing bias."

China, which has kept bench­mark in­ter­est rates at record lows since Oc­to­ber, has been in­ject­ing liq­uid­ity and guid­ing mar­ket rates lower as it shifts to a mar­ket-based mon­e­tary frame­work. China's econ­omy grew 6.9 per­cent last year, the weak­est since 1990, as of­fi­cials try to re­duce its de­pen­dence on ex­ports and man­u­fac­tur­ing and spur do­mes­tic con­sump­tion.

Cohn said the world is try­ing to fig­ure out how suc­cess­ful China has been in mak­ing the tran­si­tion to a con­sumer-driven econ­omy. "At what rate are they con­sum­ing and what eco­nomic growth is that cre­at­ing? That is a big mys­tery to the mar­kets right now," he said. Cohn said he will "tem­per ex­pec­ta­tions that some­thing re­ally ma­jor" will emerge from the two-day G-20 meet­ing of fi­nance min­is­ters and cen­tral bankers. He said cen­tral banks should take a more global ap­proach to mon­e­tary pol­icy, with the U.S. and China among the few coun­tries that have al­lowed their cur­ren­cies to re­main rel­a­tively strong. The past five to seven years of low in­ter­est rates have done lit­tle to fuel growth and in­fla­tion, rais­ing ques­tions about how ef­fec­tive mon­e­tary pol­icy has been, Cohn said. Coun­tries have been low­er­ing rates to weaken their cur­ren­cies and ex­pand their econ­omy at the ex­pense of oth­ers, he added. "We got global prob­lems with growth, we can't fix this with lo­cal mon­e­tary pol­icy," Cohn said. "We have to talk about mon­e­tary pol­icy more glob­ally to­day than we ever have."

Asia's oil mar­kets are be­ing up­ended as In­dia's and China's re­fin­ers over­take on­ce­dom­i­nant buy­ers like Ja­pan and chal­lenge the United States as the world's big­gest con­sumer. The shifts are not only es­tab­lish­ing new trade routes but are also chal­leng­ing the way oil is priced in the re­gion as the new play­ers push for more cash car­goes and fewer long-term deals.

China and In­dia's com­bined share of world oil con­sump­tion has tripled since 1990 to over 16 per­cent, near­ing the U.S. share of roughly 20 per­cent, ce­ment­ing their sta­tus as the main cen­ter of global de­mand growth.

"Asian oil mar­kets are in a tremen­dous pe­riod of flux," said Owain John­son, man­ag­ing di­rec­tor of Dubai Mer­can­tile Ex­change (DME). By 2040, China and In­dia could dou­ble their share again to a third, an­a­lysts say.

One of Asia's ris­ing traders is In­dian Oil Corp <IOC.NS>, which op­er­ates 11 re­finer­ies with a com­bined ca­pac­ity of 80.7 mil­lion tonnes a year (1.9 mil­lion bar­rels per day), a third of In­dia's ca­pac­ity and roughly the same size as Exxon's <XOM> U.S. refining base.

"Spot crude (trad­ing) gives more flex­i­bil­ity and more va­ri­ety is avail­able. Last year we raised spot pur­chases and for this year we are work­ing out a strat­egy," said its head of fi­nance A. K. Sharma.

The changes come at the ex­pense of western ma­jors, with Shell <RDSa.L> com­plain­ing in De­cem­ber that ag­gres­sive trad­ing, con­ducted by Chi­nese com­pa­nies, meant Asian crude prices didn't prop­erly re­flect the mar­ket.

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